Get personal: tailoring advice for different personalities

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Personality can be seen as the filter through which all client decisions are made but financial advisers should start from a position of similarity, not difference, when factoring a client’s personality into the advice process. 

Over the years, psychologists have distilled the myriad of human personality traits into five basic dimensions. The ‘Big Five’ personality traits are extraversion, agreeableness, openness, conscientiousness and neuroticism, and while extensive research has been published on how each of these correlates with an investor's willingness to take on risk, one expert suggests a simple, common-sense approach. 

For Bri Williams, a behavioural specialist and author of The How of Habits and Behavioural Economics for Business, financial advisers should start from a position of similarity, not difference, when factoring a client’s personality into the advice process.

“In other words, before worrying about how each client is different, understand how humans are all similarly wired to make decisions,” she says. Your job is to address each of these barriers that stop financial advice being sought and acted upon.”

Once the adviser has dealt with decision-making at this macro level, Williams says they should look to adding nuance to interactions with individual clients.

“Some like detail, others prefer case studies. Some respond to numbers, others to story. The key is to adapt your method of imparting information to the way that best resonates with them, otherwise you'll both get frustrated,” she says.

A good example of this is presented in The SMSF Report, produced by CommBank in 2017 with the SMSF Association, where the research identified four typical self-managed superannuation fund investor profiles.

These are: the Outsourcer, “I’d rather someone else do it”; the Self-Directed Investor, “I’m interested in it and I like doing it myself”; the Coach Seeker, “I’d rather do things myself but I am looking for someone to help me”; and the Controller, “I’d rather do things myself but I need information to support my decisions.”

The report concludes that advisers and product providers who do not adapt to the varying needs of different investor types may find it difficult to attract new SMSF clients as the sector continues to grow and evolve.

Client engagement

But how can advisers ensure that personality is a contributing factor to a client's risk profile and, ultimately, a factor in their financial plan?

“There are many personality profiling tools you can draw upon. Asking your clients to complete a short survey will show you are interested in them as individuals rather than giving them generic information,” says Williams.

“Always remember that people are the hero of their own story, so the more you do to show you are interested in them, the better your relationship will be.”

And while financial advisers usually explore factors like age, size of the investment portfolio, expected retirement date, future earnings and financial obligations to gauge an investor's risk tolerance, personality also influences the soft skills an adviser may need to apply to get the full picture.

“I think of personality as the filter through which decisions are made. A highly agreeable person, for instance, may be more interested in following your advice than someone low in this trait,” says Williams.

“If you want your client to act on your advice, it helps to know how best to frame the information so it lands. Should you give them lots of information, for example, or should we spend more time on a visioning exercise? Should you draw diagrams and pictures, or send them a spreadsheet? Do they prefer face-to-face discussion or an occasional email?”

For Williams, the key lesson is that client engagement requires multiple interactions, from letters of engagement to invoicing and everything in between. The adviser’s role is to make each of these interactions fruitful for everyone involved. 

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Important: This article has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. Before acting on the information, you should consider its appropriateness to your circumstances and if necessary, seek appropriate professional advice. Any information used in this article is for illustrative purposes only. Bri Williams is external and not a member of the Commonwealth Bank of Australia Group of Companies (the Group) and the content or any view expressed by Williams does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. CBA, nor members of the Group accept any liability for losses or damage arising from any reliance on external parties, their products, services and materials. Past performance is no guarantee of future performance.